THE “SEPTEMBER” EFFECT

IF WE GET THROUGH FALL WITHOUT A SUPER CRASH – WE CAN BREATHE

The economy is weakening, home sales are plunging and stocks are on a long slide. Now comes something even scarier for investors — the beginning of what is traditionally the worst month in the market.

Could stocks be headed for another September swoon? CEO SPACE has cautioned that OCTOBER is the month to monitor for a possible SUPER CRASH.

“If history is any guide, for it’s never gospel, we may be in for another rough ride,” says Sam Stovall, chief investment strategist at Standard & Poor’s.

Mutual fund managers tend to clean house after Labor Day, taking profits on winning stocks and weeding out portfolios before putting out the rosiest possible end-of-quarter reports for their clients.

September swoon

No month has brought worse results in the stock market than September. Here is the average monthly price change, from 1950 through July 2010, for the S&P 500 index. Months are listed from best performance to worst:

•December: 1.6 percent gain
•November: 1.6 percent gain
•April: 1.5 percent gain
•March: 1.2 percent gain
•January: 1 percent gain
•July: 1 percent gain
•October: 0.6 percent gain
•May: 0.3 percent gain
•August: 0.1 percent gain
•June: 0.04 percent loss
•February: 0.2 percent loss
•September: 0.6 percent loss

.Workers coming back from summer breaks are also inclined to sell stocks as they get their financial affairs in order. Any festering issues with the economy or stocks during the summer, when trading volume is light, tend to get put off until fall.

The result: September is usually a dog of a month for the market. It typically starts with solid market increases, then tails off, says Jeffrey Hirsch, editor-in-chief of the Stock Trader’s Almanac.

“There’s just a general selling bias in the month of September,” he says.

Four times in the past decade alone, the S&P 500 shed at least 5 percent in September. The average September decline since 1950 is 0.6 percent, according to the Stock Trader’s Almanac. February is the next worst, with an average 0.2 percent loss, and December and November are the best, averaging 1.6 percent gains.

Of course, investors haven’t forgotten that the financial world collapsed in September just two years ago. And the Sept. 11 attacks, which delivered a devastating blow to the stock market, remain a painful memory.

This year, there’s a lot to frown about. The S&P 500 index is down 14 percent from its high in April, and 5 percent for the month of August alone as of Tuesday afternoon.

Stocks have fallen because the economic recovery is faltering. The economy has slowed to anemic growth, home sales the last three months are the worst on record, consumer spending is lackluster and unemployment is stuck near 10 percent.

The slew of weak economic data sapped the market of what little midsummer momentum it had and further shook the confidence of already wary investors.

“I don’t think it would take a whole lot to get investors to start selling and consumers to start pulling back again,” says Mark Zandi, chief economist at Moody’s Economy.com. “The collective psyche is on edge.” CEO SPACE has reported the RISK remains one more – just one MORE – trigger event of a manipulation hedge fund run on a TOO BIG TO FAIL – they risk the entire system as they profit. This is our opinion in today’s market of speculation manipulation profiteering and greed. We must return to a REAL market. The problem is how much pain before we do.

Federal Reserve Chairman Ben Bernanke said last week that the central bank is ready to take additional steps to boost the economy, including buying more debt or mortgage securities in order to keep interest rates low.

But with the benchmark interest rate already near zero, any Fed action is unlikely to provide the oomph of past measures. Congress doesn’t appear to have an appetite for another stimulus package.

Also hanging over the market is an air of heightened uncertainty because the November elections will determine which party controls Congress for the next two years. The S&P 500 has declined an average 1.7 percent in the September before midterm elections since 1930. Uncertainity at the congress and leadership level is not a good sign for the SEPT EFFECT.

Not that September isn’t bad enough already without all of this year’s baggage. It’s one of only three months, along with February and June, when stock prices typically decline.

The uncertainty is a serious consideration for financial advisers such as Dominick Vetrano of Fountainhead Financial in Chicago. He holds off putting more money into stocks beginning in August, even though he thinks the September market dips are usually psychological.

“There is little to gain by investing right before September and a lot to lose, so why risk it?” he says. “The September effect is well-documented.”

The Big investors all return to the market NEXT week from EU Holiday’s this week. The isssue of how the BIG INVESTORS in the enormous speculation markets will form their positions is the dog versus the tail for Sept…and their desires to profit shor term. Always so short term versus long term as a real market requires. And the speculators know the SEPT EFFECT trends as well as you do. Be prepared with information.

Berny Dohrmann
Chairman – www.ceospace.net

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